50 year anniversary of India turning sharply left in 1966…

We are celebrating 25 years of 1991 reforms. However, there is another equally important 50 years anniversary. It was in 1966, that India turned extremely left due to the political developments. It led to wide-scale bank nationalisation, income tax levels of 97%, private industry coming to halt and so on.

Fifty years ago, India started the year 1966 with a peace treaty with Pakistan after a 17-day war, and the sad demise of Prime Minister Lal Bahadur Shastri. On January 10, 1966, Shastri signed the Tashkent Declaration with Pakistan’s President Field Marshal Ayub Khan. Alexei Kosygin, the prime minister of the former Soviet Union, was the witness. The following day, he passed away. Tashkent in Uzbekistan has symbolic significance for India. This was the foreign city where revolutionary M N Roy had founded the first Communist Party of India in 1920.

A lot happened in India in 1966. After Shastri, Indira Gandhi became the prime minister in troubled times. The conservative faction of the Congress led by Morarji Desai contested her leadership, foreign aid was cut off after the war with Pakistan, and two successive severe droughts drastically reduced foodgrain production requiring the introduction of statutory rationing of rice and wheat. With exports affected and aid discontinued, there was a balance of payments crisis.

Things changed extensively in 1966:

Within two months of taking charge, at end-March, Prime Minister Indira Gandhi visited the United States. By all accounts, her visit and meetings with President Lyndon Johnson went well. The rupee was devalued by 36.5 per cent on June 6, 1966. There was bitter criticism in Parliament and media, and the act was construed as a capitulation to the capitalist West and its handmaidens such as the World Bank. Critics were not confined to the Opposition; it included K Kamaraj, the Congress president. Wholesale price inflation shot up to 13.9 per cent in 1966-67 and 11.6 per cent in 1967-68. The aid package from the Aid India Consortium and the World Bank were disappointing. The food shortage was aggravated by Lyndon Johnson’s “ship to mouth” policy.

Aggravated by severe attacks for the devaluation, Indira Gandhi turned left. She gave lukewarm support to the liberalisation effort and denied that the devaluation was under donor pressure. She went on a state visit to Moscow from July 12 to 16, 1966. The communique signed by her and Alexei Kosygin criticised the USA for its bombing of Vietnam without stressing that the Geneva Conference on Vietnam should be reconvened, which India used to do in the past as a part of its balanced approach. The communique also held imperialist and other reactionary forces responsible for deterioration in world affairs.

Congress won the general election for the Fourth Lok Sabha during February, 1967 with a considerably reduced strength. Its strength came down from 361 in a house of 494 in the 1962 election to only 283 in a house of 520. Furthermore, the Congress lost in eight States – Bihar, Haryana, Kerala, Madhya Pradesh, Madras (what became Tamil Nadu), Orissa, Punjab, and West Bengal – where non-Congress governments were formed.

A clearly shaken Congress took a decisive turn towards “pro-people” socialist statist policies. In May 1967, the Congress Working Committee adopted a radical Ten-Point Programme which included (i) social control of banks, (ii) nationalisation of general insurance, (iii) state trading in import and export, (iv) state trading in food-grains, (v) curb on monopolies, and (vi) abolition of princely privileges. A clear shift to the Left.

Just like we recall 1991 so much, we must remember 1966 as well. It was this year where things became really excruciating for Indian economy.